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Title:Measuring regional market integration by dynamic factor error correction model (DF-ECM) approach: The case of developing Asia PDF Logo
Authors:Qin, Duo
Cagas, Marie Anne
Ducanes, Geoffrey
Magtibay-Ramos, Nedelyn
Quising, Pilipinas F.
Issue Date:2006
Series/Report no.:Working Paper, Department of Economics, Queen Mary, University of London 565
Abstract:This paper examines empirically the dynamic process of regional market integration for twelve individual Asian economies by a new modeling approach, which combines DF with ECM. This new approach enables us to obtain latent regional dynamic factors, which correspond well with the 'foreign' parity variables in theory when market is imperfectly integrated and which act, in explaining domestic short-run price adjustments, as leading-indicators in an error-correction form. The power of the DF-ECM approach is illustrated in its application to measuring market integration in the developing Asian region using monthly data of the past decade.
Subjects:Law of one price, Market integration, Dynamic factor, Error-correction model
JEL:F31
F40
F15
C22
C33
Document Type:Working Paper
Appears in Collections:Working Paper Series, School of Economics and Finance, Queen Mary, University of London

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